Compliance September 11, 2019

MIT ERISA Lawsuit Plaintiffs Seeking More Information About Gifts From Fidelity

The plaintiffs say new evidence came to light from MIT President Rafael Reif’s response to revelations that improper donations were received by MIT from the now-deceased financier Jeffrey Epstein.

Reported by

The plaintiffs in an Employee Retirement Income Security Act (ERISA) lawsuit alleging mismanagement and disloyalty on the part of Massachusetts Institute of Technology (MIT) defined contribution retirement plan fiduciaries have requested leave to file new evidence of MIT President Rafael Reif’s unique knowledge related to the case.

The plaintiffs say that new evidence came to light after they filed an opposition to the defendants’ Motion in Limine 2 seeking to prevent the testimony of Reif and former chairman John Reed.

Get more!  Sign up for PLANSPONSOR newsletters.

According to the court document, in response to revelations that improper donations were received by MIT from the now-deceased financier Jeffrey Epstein, who was involved in a criminal investigation, Reif addressed what MIT’s policy for improper donations would be in the future. He also “asked MIT’s General Counsel to engage a prominent law firm to design and conduct [a thorough and independent investigation].”

The plaintiffs also noted that in an earlier letter to the MIT Community, Reif said “decisions about gifts are always subject to longstanding Institute processes and principles” and “despite following the processes that have served MIT well for many years, . . . we made a mistake of judgment.” They contend this new declaration reveals that Reif is uniquely responsible for the oversight of MIT employees and the investigation, compliance and enforcement of conflict of interest policies related to donations.

The plaintiffs are seeking to inquire about whether the policy changes Reif instructed the committee to investigate include donations to MIT from MIT Supplemental 401k Plan vendors paid by employees’ retirement assets. “His failure to initiate the same type of investigation related to Fidelity’s gifts and donations to MIT, both today and in the past, is something to which only Reif can testify,” the plaintiffs state.

They also note that two of Reif’s subordinates received gifts from Fidelity and instructed their subordinates to stop all actions related to the plan’s payment of fees to Fidelity. The plaintiffs point out that one of Reif’s subordinates did not disagree with an email stating that MIT expected large donations after retaining Fidelity as the plan’s service provider.

“These and other disturbing engagements with the Plan’s primary service provider, Fidelity, went uninvestigated and unchecked,” the plaintiffs state. They add that they intend to seek injunctive relief preventing MIT from hiring vendors for the plan that are donors (or foundations controlled by common ownership with the vendor) or accepting donations from existing vendors to the plan.

U.S. District Judge Nathaniel M. Gorton of the U.S. District Court for the District of Massachusetts last week moved forward most claims in the lawsuit, but granted summary judgment to the defendants for a claim alleging a prohibited transaction between MIT and Fidelity Investments.
Compliance September 11, 2019

Greystar Moves to Compel Arbitration of ERISA Complaint

Following a high-profile 9th Circuit decision, Greystar argues that the plaintiff signed a Mutual Agreement to Arbitrate Claims that not only requires arbitration of her claims but forecloses her from bringing any class action.

Reported by

Greystar Management Services, L.P. has filed a Motion to Compel Arbitration and Dismiss the Complaint with the U.S. District Court for the Western District of Texas in a case alleging it breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by allowing excessive administrative and investment fees to be charged.

Greystar argues that the plaintiff signed a Mutual Agreement to Arbitrate Claims that not only requires arbitration of her claims against Greystar but delegates to the arbitrator the power to decide questions regarding the applicability and enforceability of the agreement. In addition, it says the agreement contains a class action waiver foreclosing the plaintiff from bringing any class or collective action.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

According to the motion, in July 2016, Greystar implemented a new policy requiring all new and existing employees to enter into the Arbitration Agreement as a condition of employment with Greystar. All Greystar employees were given notice of the required Arbitration Agreement by email four times between July and September 2016. To facilitate employees’ review of the Arbitration Agreement, the Information Technologies (IT) department at Greystar created a module on Greystar’s employee training portal through which all employees could review the Agreement in full and either accept or decline the Agreement.

The motion further states that on August 1, 2016, as a condition of her continued employment, the plaintiff logged in to the employee portal using her Greystar credentials and assented to the Arbitration Agreement by clicking “I agree” on the appropriate screen in the portal. The plaintiff later confirmed by email to her supervisor that she and all other employees at her property had accepted the agreement. Greystar subsequently terminated any employees who had not accepted the Arbitration Agreement by October 1, 2016.

Specifically, the Agreement provides: “Except for the claims expressly excluded by this Agreement, both you and the Company agree to arbitrate any and all disputes, claims, or controversies (claim) that the Company may have against you, or that you may have against the Company and/or its parent corporation, affiliates, subsidiaries, divisions, officers, directors and agents thereof, which could be brought in a court of law, including, but not limited to, all claims arising out of or relating to your employment with the Company and/or the end of your employment with the Company.”

Greystar adds that the Arbitration Agreement also provides that “all claims must be pursued on an individual basis only,” and contains an explicit waiver by the plaintiff of any right to bring a class or collective action against Greystar.

The company contends that filing the class action lawsuit was in violation of the plain language of the Arbitration Agreement. On September 4, 2019, Greystar reminded her of her Arbitration Agreement and asked that she withdraw the complaint and proceed with arbitration, but she has not.

Greaystar says the Federal Arbitration Act (FAA) sets forth a “strong federal policy in favor of enforcing arbitration agreements.” As a result, “a court’s sole task is to determine whether a valid arbitration agreement has been presented and, to the extent the question is not delegated to the arbitrator, whether the claims alleged are arbitrable,” it adds. “Indeed, this Court’s task is particularly straightforward given that the Arbitration Agreement provides that the arbitrator, rather than a court, should decide questions of arbitrability.”

The move by Greystar comes after the 9th U.S. Circuit Court of Appeals in August issued a ruling in the Michael F. Dorman et al vs. The Charles Schwab Corp. et al case that Schwab could enforce its retirement plan’s arbitration clause requiring participants to file individual claims and to waive class-action claims.

Legal sources have said that the 9th Circuit’s ruling leaves unanswered questions, and arbitration is not the perfect option plan sponsors may think.

«